As interest rates have risen, so have the costs of home renovation, improvement and repair projects. Materials such as kitchen cabinetry have faced a price increase of approximately 40-50%, and concrete and asphalt have experienced spikes in prices by as much as 80%. As a result, homeowners may seek alternate ways to fund their home renovation or repair.
If you’re contemplating a major home renovation in 2023 or beyond but are unsure about financing, this blog has you covered. Let’s delve into six ways to finance your home repair or renovation without dipping into your savings.
1. Home Equity Line of Credit (HELOC)
Utilize the equity in your home through a HELOC to borrow against your home’s value and repay what you use. Typically, HELOCs offer lower interest rates than credit cards and personal loans.
2. Mortgage Incorporation
Consider including renovation costs in your mortgage payments when purchasing a new home. Alternatively, add the renovation expenses to your existing mortgage during mortgage refinancing. This approach may help you secure lower interest rates and monthly payments than unsecured loans.
3. Unsecured Line of Credit
If HELOC or refinancing options aren’t viable, explore unsecured lines of credit for borrowing flexibility. Remember that personal lines of credit typically come with higher interest rates due to the absence of collateral.
4. Second Mortgage
Some homeowners opt for a second mortgage to fund renovations, offering immediate cash at a lower interest rate than personal lines of credit. However, this means managing two mortgage payments.
5. Credit Card
A credit card may not be the most favourable option due to high interest rates, but it is a financing option for home renovations. Use this avenue cautiously to avoid accumulating substantial interest charges.
6. Borrowing from Family or Friends
If it’s an option, consider borrowing money from family or friends to fund your renovation or repair. Ensure you establish clear repayment terms to maintain healthy relationships.